Latest media releases

Global Real Estate Bubble Index for select urban housing markets: Bubble risk on the rise (SWISS VERSION)

Zürich Media Releases Switzerland


  • UBS CIO Wealth Management's UBS Global Real Estate Bubble Index report analyzes residential property prices in 18 select cities around the world.
  • Overvaluations became more pronounced in a majority of cities. Vancouver faces the greatest risk of a housing bubble.
  • However, among the four most important financial centers bubble risk was on the rise only in London. In New York, Singapore and Hong Kong valuations stagnated or decreased the last four quarters.
  • Housing market risk in Zurich is higher than in Geneva, but affordability level is high compared to other cities.

Zurich, 27 September 2016 – Housing markets are again overheating, just a few years after the last major wave of global correction. The UBS Wealth Management Global Real Estate Bubble Index indicates a significant overvaluation of housing markets in some urban centers.

Vancouver tops the index in 2016. Bubble risk also seems eminent in London, Stockholm, Sydney, Munich and Hong Kong. Deviations from the long-term norm point to overvalued housing markets in San Francisco and Amsterdam. Valuations are also stretched, but to a lesser degree, in Zurich, Paris, Geneva, Tokyo and Frankfurt. In contrast, Singapore, Boston, New York and Milan are fairly valued, while Chicago's housing market remains undervalued relative to its own history.

Claudio Saputelli, Head of Global Real Estate in UBS Wealth Management's Chief Investment Office, says: "House prices of the cities within the bubble risk zone have increased by almost 50% on average since 2011. In the other financial centers, prices have only risen by less than 15%. This gap is out of proportion to differences in local economic conditions and inflation rates. What these cities have in common are excessively low interest rates, which are not consistent with the robust performance of the real economy. When combined with rigid supply and sustained demand from China, this has produced an "ideal" setting for excesses in house prices."

Matthias Holzhey, Real Estate Economist in UBS Wealth Management's Chief Investment Office, says: "The situation is fragile for the most overvalued housing markets. A sharp increase in supply, higher interest rates or shifts in the international flow of capital could trigger a major price correction at any time."

Europe: One-size-fits-all monetary policy increases imbalances

Within the Eurozone, interest rates cannot be adjusted to the particular economic development in each of the member states. The economic weakness of the Eurozone is simultaneously forcing the other EU countries and Switzerland to pursue a supportive monetary policy. This low-interest phase in the growth engines of Europe has contributed to overheating of markets for urban residential properties in recent years. Consequently, the sharpest increase in the UBS Global Real Estate Bubble Index in Europe since mid-2015 was measured in Stockholm, followed by Munich, London and Amsterdam.

London remains by far the most overvalued housing market in Europe with an index score of 2.06, which is in bubble-risk territory. Since 2013, London's property prices have increased at a double-digit rate every year. The Bank of England's easing policy, the renewed GBP depreciation following the UK’s vote to leave the EU and tight supply should maintain the inflated prices for the time being. However, in case of a longer-lasting economic weakness, the risk of severe correction in the medium term is very high.

Switzerland: Zurich overtakes Geneva

Between 2000 and 2012 Geneva exhibited the second strongest price growth of all monitored cities and stood at the edge of bubble risk four years ago. The gradual normalization of Geneva's housing market since 2012 points to a reduction of speculative demand in wake of troubles of the local financial sector. However, the world's lowest interest rates and miniscule construction activity prohibited a steeper correction.

After a breather, valuations in Zurich started to increase again within the last 12 months in the wake of a rebound in price growth and sluggish economic growth. According to the index, valuations are meanwhile higher in Zurich than in Geneva – but both are far from bubble risk at present. Overall, affordability in both Swiss cities is relatively high compared to many other world cities. Moreover, Zurich has the best private rental market affordability of all financial centers included in the index.

How to identify a bubble

The term bubble refers to a substantial and sustained mispricing of an asset. A bubble cannot be proven conclusively unless it bursts, but recurring patterns of property market excesses are observable in the historical data.  The UBS Global Real Estate Bubble Index gauges the risk of a property bubble on the basis of such patterns in select global financial centers. The index uses the following risk-based classifications: depressed, undervalued, fair-valued, overvalued and bubble risk. Even in the cities with the clearest signs of a real estate bubble, it is not possible to predict exactly the timing and duration of a correction.

The analysis is complemented by a comparison of current price-to-income (PI) and price-to-rent (PR) ratios. Low affordability indicated by the PI ratio points to diminished long-term price appreciation prospects, while high PR multiples indicate a dangerous dependence on low interest rates.


UBS Global Real Estate Bubble Index:
Further information on UBS Wealth Management's Chief Investment Office:

UBS Switzerland AG


Media contact

Dr. Matthias Holzhey, Head Swiss Real Estate Investments, Chief Investment Office WM
Phone +41-44-234 71 25,

Claudio Saputelli, Head Swiss & Global Real Estate, Chief Investment Office WM
Phone +41-79-513 50 45,